@AimSharepointIT I have had the same issue with installing the MS Provided unzipper in SharePoint for Office 365. I found the tool and added it to the Menu and it integrated well. I got a similar error when I used it on large files. I discovered that there is a 100MB limit to it.. I tried to look for an after market tool, and there are some, but they are either not supported anymore or haven't updated their code since MS brought out their limited tool.
Some of the other apps I looked at ( on the Sharepoint addon site)
Adactit File Handler
No Zipping Functionality
Tru Copy and Paste
Not updated since 2016
Previously tested and found not to install
Zip it Light
Only downloads selected files as ZIP, this is now baseline feature of SharePoint online
Only creates ZIP files
one review with "It doesn't work. Waste of time" - 2019
Does however install onto our SharePoint
Fail's to launch from modern sharepoint
I haven't looked again for a little while ( 6 Months), perhaps its got better but looking at your error, I don't think so.